Thematic exchange traded funds are often framed as products that are beloved by retail investors. While that’s accurate to an extent, plenty of professional investors embrace thematic strategies, too.
Both scenarios are positives for the ALPS Disruptive Technologies ETF (CBOE: DTEC) because the audience of potential users of this fund is broadened. The shift to thematic investing is well underway, and that could be a sign that some investors, including professionals, will find their way to DTEC in the future.
“The major shift towards thematic investing continues unabated. Data from Morningstar shows that over the three years to March 2021, assets under management for thematic funds have more than tripled to USD 595 billion. This accounted for 2.1% of all assets invested in equity funds globally, up from 0.6% 10 years ago,” notes BNP Paribas.
A new survey conducted by Greenwich Associates and sponsored by BNP Paribas Asset Management doesn’t specifically mention DTEC, but there are data points in the study indicating that DTEC could be in the right place at the right time as nine of 10 wholesale and institutional investors expect thematic strategies to be accretive to long-term performance.
DTEC could be a logical destination for those investors and others because the fund doesn’t hone in on a single theme. Rather, it mitigates individual theme risk with a diverse approach. DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across several thematic areas, including healthcare innovation, the internet of things, clean energy and smart grid technology, cloud computing, data and analytics, fintech, robotics, artificial intelligence, cybersecurity, 3D printing, and mobile payments.
The aforementioned survey also confirms that investors have some preferred themes that they’re looking to tap into.
“Sstainability[sic]: namely, investing around broad sustainability related themes such as the UN’s sustainable development goals (SDGs), and in climate change solutions and renewable energy,” adds BNP Paribas. “Disruption: investing in robotics & artificial intelligence, disruptive technology, and healthcare innovators.”
DTEC equally weights the themes represented in the fund, but even with that methodology, artificial intelligence/robotics, healthcare innovation, and clean energy/smart grid stocks combine for about 28% of the fund’s roster, confirming that DTEC is a place many thematic investors may want to be at some point.
Other technology funds to consider include the Technology Select Sector SPDR ETF (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.